US CMA Part 2 · Chapter 6 · Question 18 of 22
Lyndon Tech is launching an innovative product protected by patents, and early adopters are willing to pay a high price. Which pricing strategy is most appropriate at launch?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Price skimming: set a high initial price and lower it as competition and volume increase
Explanation
Price skimming suits innovative, differentiated products with inelastic early demand and barriers to entry such as patents; it recovers development costs quickly before prices fall. Penetration pricing suits products with elastic demand where economies of scale or network effects reward rapid market share. Predatory pricing is generally illegal under antitrust laws.
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